Promises, promises

Big new taxes from the federal government are coming - the only way to close the enormous debt that the Obama Administration is running up. That's the news from former Fed Chairman Alan Greenspan and Treasury Secretary Tim Geithner.

Both Geithner and Greenspan, appearing on the same show, insisted that the economy would not collapse. They said, however, that emergency steps, including the bailout plan last year and the economic stimulus bill this year, are expanding the federal budget deficit to unsustainable levels.
"We will not get this economy back on track, recovery will be not strong and sustained, unless we ... can convince the American people that we're going to have the will to bring these deficits down once recovery is firmly established." Geithner said.

Even though he doesn't like a Value Added tax, Greenspan told George Stephanopoulos this morning that the VAT was the best choice.

While not explicitly calling for increased taxes, another guest on “This Week,” Alan Greenspan, the former head of the Federal Reserve, said that a value-added tax or sales tax would be preferable because it “raises revenue without significantly impact the economy.”

President Obama has made a big deal out of a campaign promise to raise taxes, but only on those making more than a quarter of a million dollars a year. Geithner hinted strongly that the Administration is heading toward breaking that promise.

Geithner refused to rule out future tax increases, saying President Barack Obama's administration would take whatever steps were necessary to reduce the deficit once the economy recovers. Greenspan said he believed the government eventually will impose some kind of value-added tax to raise revenue.

The Value Added Tax is a sales tax added to an item many times as it moves through the production process.

A value-added tax is assessed on the transfer of goods and services from production to delivery, with consumers ultimately paying higher prices. It differs from a sales tax, which is directly assessed on consumers when they buy something.
Greenspan called a value-added tax "the least worst solution," calling it "the only thing that raises revenue in significant quantities without significantly impacting the economy."

Why would such a dramatic move be necessary, especially when it goes directly against the commitments of the President?

"We will not get this economy back on track, recovery will be not strong and sustained, unless we ... can convince the American people that we're going to have the will to bring these deficits down once recovery is firmly established." Geithner said.

Larry Summers, appearing on Meet the Press, was also out to help tout the shift to a tax hike.

Treasury Secretary Timothy Geithner and National Economic Council Director Larry Summers both sidestepped questions on Obama's intentions about taxes. Geithner said the White House was not ready to rule out a tax hike to lower the federal deficit; Summers said Obama's proposed health care overhaul needs funding from somewhere.
"There is a lot that can happen over time," Summers said, adding that the administration believes "it is never a good idea to absolutely rule things out, no matter what."

It appears from Geithner's comments that the administration will argue victimhood - that given the huge economic meltdown it was handed, there was no choice but to 1) spend like madmen and then, 2) raise taxes to cover the cost of stabilization strategies.